Major commercial banks have dropped their base lending rates following the Central Bank of Kenya’s reduction of the lending rate this week from 9.00 per cent to 8.75 per cent.
The Monetary Policy Committee announced the 25 basis point drop on February 10, the ninth consecutive rate cut intended to increase credit expansion and reduce borrowing costs.
Major lenders such as KCB Bank Kenya, Equity Bank Kenya, NCBA Bank Kenya, and Family Bank Kenya have responded by adjusting the rates for variable-rate loans denominated in Kenyan shillings to match the new benchmark of 8.75 percent under the Risk-Based Credit Pricing Model.
The base rate plus a customer-specific risk margin will be the pricing for new variable-rate loans starting in mid-February. Older loans are being moved to the new pricing structure by March 2026, and existing variable-rate facilities will have their benchmark changed following the required 30-day notice period.
The changes were made in January, when inflation dropped to 4.4 percent, allowing the central bank to continue its accommodative policy. Although base rates are declining, analysts point out that loan terms and individual risk margins will determine monthly loan repayments.